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Last Updated: Wednesday, 28 July, 2004, 17:05 GMT 18:05 UK
Yukos ordered to stop selling oil
Yukos worker in Siberia
Yukos employees fear they will soon be out of a job
Russian regulators have told Yukos to stop selling oil following its failure to pay a $3.4bn (1.9bn) tax demand.

Bailiffs said sales were to cease from Yukos' main production units, which produce 20% of Russia's oil output.

The move, which could speed up the collapse of the firm, triggered a leap in oil prices to a new 21-year high of $39.25 a barrel in New York.

Russia's Micex exchange suspended trade in Yukos shares indefinitely after they plummeted 20% earlier in the day.

'Misinterpretation'

Yukos chief executive Stephen Theede said the bailiffs' actions were illogical.

The BBC understands that Yukos has contacted the justice ministry for more clarification on the demands.

"My assumption was that it was a misinterpretation. It does not seem logical to me for the bailiffs to take action to immediately stop production," Mr Theede told correspondents in Nizhnevartosk in Siberia.

"We have no choice but to comply with what the bailiffs ask us to do, but sometimes it's a matter of getting an interpretation."

According to news agencies, the justice ministry told Yukos to stop selling property - an effective ban on oil sales.

The process of providing oil into the pipeline system cannot be ceased without stopping all of the companies' activities
Yukos

Reuters quoted letters sent by bailiffs to Yuganskneftegaz, which last week was put up for sale at what Yukos said would be a knock-down price, Yukos units Samaraneftegaz and Tomskneftegaz

"I demand ... an immediate halt, from the moment of receiving this order, to any activities directed at selling or changing the status of the property of ," one read.

"It should be pointed out that the process of providing oil into the... pipeline system cannot be ceased without stopping... all of the companies' activities," a Yukos spokesperson said.

This "will lead to the unemployment of 15,000 employees of the companies", he warned.

'No word'

The justice ministry, however, dismissed the claim.

"I am officially announcing that the company will have no problems, including with paying wages, as a result of a freeze of its accounts," justice minister Yury Chaika was quoted by Russian news agencies as saying.

Mikhail Khodorkovsky
Ex-chief executive Mikhail Khodorkovsky remains behind bars
The order appears to have had no impact on agreements to transport crude and petroleum products out of the Baltic and Black Sea, ship brokers told Reuters.

"We've had no word of cancellations or anything like that - it's business as usual," one broker said.

"It might be different for future bookings, though."

Once sales stop, Yukos could go to the wall relatively quickly, said analysts.

"This doesn't give Yukos long, because all of a sudden new cash flows stop coming in," said Stephen O'Sullivan, oil analyst at brokerage UFG.

The firm has said it is unable to pay the tax it owes for 2000 because its accounts and assets have been frozen by court order.

Yukos' former chief executive, Mikhail Khodorkovsky - one of the "oligarchs" or super-rich Russians who benefited from fire-sale privatisations of state assets after the Soviet Union collapsed - is on trial for fraud and tax evasion.

The targeting of Mr Khodorkovsky, rather than any of Russia's other oligarchs, and the company he led is widely seen as part of a Kremlin-inspired drive to punish him for funding opposition parties.




BBC NEWS: VIDEO AND AUDIO
The BBC's Damian Grammaticas
"The possibility of a fall in Russia's exports sent tremors through the oil markets"



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